Performance ratios are financial metrics used to evaluate a company's efficiency and profitability. These ratios help investors and analysts assess how well a company is generating profits relative to its revenue, assets, or equity. Common performance ratios include return on equity (ROE), return on assets (ROA), and profit margin. By analyzing these ratios, stakeholders can gain insights into a company's operational effectiveness and financial health. A higher performance ratio typically indicates better management and profitability, while lower ratios may signal potential issues. Understanding these ratios is essential for making informed investment decisions.